Question

7 In January 2020, Coronado Industries, a newly formed company, issued 10200 shares of its $8 par common stock for $13 per share. On July 1, 2020, Coronado Industries reacquired 1020 shares of its outstanding stock for $10 per share. 1.The acquisition of these treasury shares increased total stockholders' equity. 2. decreased total stockholders' equity. 3. did not change total stockholders' equity. 4. decreased the number of issued shares.

Answer 1

2. decreased total stockholders' equity.

Step-by-step explanation:

January 7, 2020, stocks are issued:

Dr Cash 132,600

Cr Common stock 81,600

Cr Additional paid in capital 51,000

July 1, 2020, treasury stocks are purchased:

Dr Treasury stocks 10,200

Cr Cash 10,200

Treasury stocks is a contra equity account which reduces the value of total stockholders' equity. When they are purchased, treasury stocks account must be recorded at the full repurchase price of the stocks.